Microsoft apologises, offers refunds as it faces $50m fine over ‘duping’ customers over Copilot AI assistant
The tech behemoth has apologised to customers as it faces a fine of up to $50m for concealing cheaper subscription plans from millions of Australians during its AI rollout.
Microsoft apologised and began offering refunds to millions of its Australian customers after the competition watchdog accused it of duping users into paying more for its Copilot artificial intelligence assistant when they didn’t need it.
Microsoft could face a penalty of up to $50m if found in breach of Australian consumer law after its actions affected 2.7 million customers who subscribe to Microsoft 365 plans, which includes access to popular programs such as Word, Excel and PowerPoint.
On Thursday morning, the $US3.78 trillion titan, apologised to customers, saying it had “fell short of its standards”. “We will learn from this and improve,” a spokesman for Microsoft Australia said.
The Australian Competition and Consumer Commission’s lawsuit centres on Microsoft’s decision to integrate its Copilot AI assistant into its Microsoft 365 Personal and Family subscription plans in Australia, a move accompanied by a significant price increase.
The ACCC alleges that Microsoft informed customers they must either accept the higher-priced, AI-integrated plan or cancel their subscription entirely, while deliberately omitting a crucial third option. This undisclosed option was the “Classic” plan, which allowed subscribers to retain their core Microsoft 365 apps at the previous, lower price point without the Copilot integration.
The ACCC claims that this omission was a deliberate tactic to increase the number of consumers on the more expensive plans, with the annual price of the Microsoft 365 Personal plan jumping by 45 per cent, from $109 to $159, and the Family plan increasing 29 per cent, from $139 to $179.
“We have been present in Australia for more than 40 years, operating on the principles of trust and transparency,” the Microsoft spokesman said.
“In response to the demand for advanced AI tools, we introduced AI capabilities into the Microsoft 365 Personal and Family subscriptions that we offer in Australia. In hindsight, we could have been clearer about the availability of a non-AI enabled offering with subscribers, not just to those who opted to cancel their subscription.”
Microsoft also sent an email to customers on Thursday morning, offering refunds. Microsoft will refund the difference in price between the old and new plans, starting from the customer’s first renewal date after November 30, 2024. To qualify, Australian subscribers must switch to the Classic plan by December 31, 2025. The refund will be processed within 30 days of the switch, the email said.
“In our email to subscribers, we expressed our regret for not being clearer about our subscription options, shared details about lower-priced alternatives that come without AI and offered a refund to eligible subscribers who wish to switch.”
It follows a “detailed investigation” from the ACCC, which chair Gina Cass-Gottlieb said showed Microsoft had concealed the existence of the classic plans until subscribers initiated the cancellation process.
The ACCC is now seeking penalties — potentially up to $50 million — as well as injunctions, declarations, and consumer redress.
“We will allege in court that Microsoft deliberately omitted reference to the Classic plans in its communications and concealed their existence until after subscribers initiated the cancellation process,” Ms Cass-Gottlieb said last week.
She said that the Microsoft Office apps included in the 365 subscriptions are “essential in many people’s lives,” making the decision to cancel a nontrivial one for consumers. “We’re concerned that Microsoft’s communications denied its customers the opportunity to make informed decisions about their subscription options,” Ms Cass-Gottlieb stated.
Microsoft integrated Copilot into its 365 plans, vowing to end “drudgery” and turbocharge productivity. It has since been rolling out Copilot across its business customers, with Telstra buying 21,000 licences.
The legal challenge by the ACCC, which cites two emails sent by Microsoft last October and in April 2025, along with a blog post, underscores the increasing regulatory scrutiny of how global tech firms are managing the rollout of generative AI features and corresponding price restructuring.
The case will determine not only Microsoft’s culpability under Australian consumer law but could also set a precedent for how tech companies communicate significant product changes and pricing strategies to consumers globally, especially as AI features become integrated into core software products. The ACCC’s allegations suggest that, given the choice, many customers would have preferred to avoid the price increase and forego the AI-driven productivity enhancements, which Microsoft had previously touted as saving an average staff member “about 20 hours a month.”
Originally published as Microsoft apologises, offers refunds as it faces $50m fine over ‘duping’ customers over Copilot AI assistant
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